RITA PARWANI, MUMBAI V. ITO WD 25(3)(3), MUMBAI

ITA 1522/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75505 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA , AM & SHRI VIJAY PAL RAO, JM ITA N O. 1522 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 20 0 5 - 20 0 6 ) MRS. RITA PARWANI, PARWANI HOUSE, 113 - AB, GOVERNMENT INDUSTRIAL ESTATE, CHARKOP, KANDIVLI (WEST), MUMBAI - 67 VS. ITO WARD - 25(3)(3) MUMBAI - 5 1. PAN/GIR NO. : A CVPP 9889 K ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. KAPIL JAIN /REVENUE BY : MR . SANJEEV JAIN DATE OF HEARING : 3 RD FEBRUARY DATE OF PR ONOUNCEMENT : O R D E R PER VIJAY PAL RAO , J M : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25 - 1 - 2011 OF THE LEARNED CIT(A) - 35 , MUMBAI , ARISING FROM PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE I.T. ACT FOR THE ASSESSMENT YEAR 20 0 5 - 0 6 . 2 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY RS. 59,567/ - U/S.271(1)(C) OF INCOME - TAX ACT, 1961. THE LEARNED COM MISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT THE EXPENDITURE WHICH DISALLOWED BY THE AO IS GENUINE AND AO DID NOT DOUBT THE GENUINENESS OF THE EXPENDITURE, BUT ONLY HELD THAT AS THE INTEREST INCOME ASSESSABLE UNDER THE HEAD INCOM E FROM OTHER SOURCE WHICH IS A ITA NO. 1522 /1 1 2 SPECIFIC HEAD THE EXPENDITURE COULD NOT BE ALLOWED AS CLAIMED BY APPELLANT AS A BUSINESS EXPENDITURE. THERE WAS NO CONCEALMENT OF INCOME NEITHER FURNISHING OF IN - ACCURATE PARTICULARS BY THE APPELLANT AS THERE WAS HONEST AN D BONAFIDE DIFFERENCE IN OPINION REGARDING THE HEAD OF INCOME IN WHICH INTEREST INCOME IS ASSESSABLE. 3 . THE ASSESSEE OFFERED INTEREST INCOME OF RS. 4,21,002/ - AND CLAIMED EXPENSES AT RS.1,98,356/ - . THE AO IN THE ASSESSMENT TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AND ACCORDINGLY DISALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE. THE DISALLOWANCE MADE BY THE AO BY TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES WAS CONFIRMED BY THE CIT(A) IN QUANTUM APPEAL , WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. SUBSEQUENTLY, THE AO LEVIED PENALTY UNDER SECTION 27(1)(C) IN RESPECT OF THE DISALLOWANCE OF RS. 1,94,630/ - VIDE ORDER DATED 30 - 3 - 2010. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE THE CIT(A), HOWEVER, COULD NOT SUCCEED. 4. BEFORE US, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO BY ASSESSING INCOME OFFERED BY THE ASSESSEE UNDER A DIFFERENT HEAD. HE HAS FURTHER SUBMITTED THAT THE AO HAS NOT DOUBTED THE GENUINENESS OF THE EXPENSES BUT THE DISALLOWANCE IS ONLY DUE TO THE DIFFERENCE OF OPINION AND THAT TOO A DIFFERENT STAND HAS BEEN TAKEN BY THE AO IN COMPARISON TO THE EARLIER ASSESSMENT ORDERS, WHERE THE INTEREST INCOME OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTM ENT. HE HAS FILED THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2001 - 02 AND SUBMITTED THAT THE AO ACCEPTED THE ITA NO. 1522 /1 1 3 INTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE AND ALLOWED THE EXPENSES WHICH ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATION. THE LEARNED AR H AS FURTHER CONTENDED THAT SINCE 2001 - 02 TILL THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS NO DISALLOWANCE BY THE AO AND THIS IS THE FIRST YEAR WHEN THE AO HAS TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME OFFERED BY THE ASSESSEE. THEREFORE, THE CLAIM OF THE ASSESSEE IS BONAFIDE AND DISALLOWANCE OF THE SAME WOULD NOT ATTRACT THE PENAL PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. LEARNED AR HAS FURTHER SUBMITTED THAT THESE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT AS NORMAL BUSINESS EXPENSES IN THE COURSE OF MONEY LENDING/FINANCE BUSINESS. 5 . ON THE OTHER HAND, LEARNED DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE QUANTUM PROCEEDINGS, THE CIT(A) HAS ALSO QUESTIONED THE GEN UINENESS OF THE EXPENSES INCURRED BY THE ASSESSEE AND, THEREFORE, THE PENALTY IS JUSTIFIED. 6 . HAVING CONSIDERED TH E RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE AO WHILE PASSING THE ASSESSMENT UNDER SECTION 143(3) HAS TREATED THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND CONSEQUENTLY THE EXPENDITURE CLAIMED BY THE ASSESSEE HAVE BEEN DISALLOWED. THE AO HAS NOT CONDUCTED ANY ENQUIRY OR GIVEN ANY FINDING THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE BOGU S OR FALSE. WE FURTHER NOTE THAT THE REVENUE HAS ITA NO. 1522 /1 1 4 ACCEPTED THE ACTIVITY OF MONEY LENDING OF THE ASSESSEE AS BUSINESS ACTIVITY FOR THE SEVERAL YE ARS I.E. SINCE THE ASSESSMENT Y EAR 2001 - 02. THOUGH THE ASSESSEE IS NOT HAVING ANY LICENCE FOR MONEY LENDING BUSIN ESS, HOWEVER, WHEN THE ACTIVITY OF THE ASSESSEE OF MONEY LENDING IS CONSISTENTLY UNCHANGED FOR THE YEARS TOGETHER AND THE REVENUE HAS ACCEPTED THE SAME THEN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES AND CONSEQUENTLY DISALLOWING THE EXPENDIT URE WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. EVEN OTHERWISE, WE ARE OF THE VIEW THAT WHEN THE ASSESSEE IS CONSISTENTLY OFFERING THE INTEREST INCOME AS BUSINESS INCOME AND THE REVENUE HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN PAST THEN IT IS A BONAFIDE CLAIM OF THE ASSESSEE AND DISALLOWANCE OF THE SAME WOULD NOT IFSO FACTO ATTRACT THE LEVY OF PENALTY UNDER SECTION 271(1)(C). 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF T HE CASE, WE DELETE THE LEVY OF PENALTY FOR THE YEAR UNDER CONSIDERATION. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 05/02 / 201 4 . /2014 SD/ - ( ) ( SANJAY ARORA ) SD/ - ( ) ( VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 05 /02 /2014 /PKM , PS ITA NO. 1522 /1 1 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//